Appellate Court Restricts NYSDEC Ability to Spend Superfund Money

A legal maxim is that  bad facts often make bad law. It appears that complex facts may have confused an Appellate Division court in In the Matter of FMC Corporation vs New York State Department of Environmental Conservation, 2016 N.Y. App. Div. LEXIS 6785 (App. Div.-Third Dept. 10/20/16) where the three judge-panel appeared to rule that the NYSDEC may not spend money from the state superfund until it first provides a hearing to a potentially responsible party.


The facts are dense but can be summarized as follows. FMC Corporation (FMC) operated a 103-acre facility located in the Village of Middleport, New York that manufactured a variety of organic and inorganic pesticides, fungicides, herbicides and insecticides containing calcium arsenate and lead arsenate since the early 1940s. In 1980, the NYSDEC added the facility to the Registry of Hazardous Waste Disposal Sites which is informally known as the state superfund (SSF) list. In 1986, the agency reclassified the facility as a class 2 site. The facility was  an interim status facility under the federal Resource Conservation and Recovery Act (RCRA).

In 1988, NYSDEC completed a RCRA Facility Assessment (RFA) that identified 53 solid waste management units (SWMUs), including eight hazardous waste management units (HWMUs). Contaminants consisting of heavy metals and dozens of other organic compounds were detected in the soil and groundwater at the Facility. Heavy metals were found in the soils at a nearby school and nearby private residences primarily from aerial deposition.

In 1991, FMC, EPA and the NYSDEC entered into an administrative order on consent (AOC)  pursuant to RCRA § 3008(h) and ECL § 71-2727(3). The AOC required FMC to complete an RCRA facility investigation (RFI), implement interim corrective measures (ICMs) and conduct a corrective measures study (CMS) if EPA determined that additional work was necessary to protect human health or the environment.

Under section section XXIX, FMC had the right to invoke the dispute resolution procedures if EPA determined additional work and/or CMS was required or if FMC disagreed with EPA decisions to disapprove or amend submissions. To exercise its right to dispute resolution, the AOC provided that FMC would have to tender a written “Notice of Dispute and Request for Resolution”  containing the basis or the objection within 15 days of receipt of any such disapproval or modification. The AOC also provided that it would be deemed satisfied and the FMC’s obligations would shall terminate upon receipt of a written statement from EPA that FMC has completed to the satisfaction of the terms and conditions of the AOC including any additional investigatory work that EPA may have determined was be necessary. The AOC also contained a reservation of rights for EPA and NYSDEC.

Between 1996 and 2003, FMC implemented a number of ICMS to address soil contamination at the school and several dozen private residences. In 2009, the agencies approved a draft RFI and directed FMC to perform a corrective measure study (CMS) to develop a corrective action plan. One year later, FMC submitted its draft CMS report, which proposed eight corrective measure alternatives (CMAs).

In June 2012, NYSDEC issued a draft statement of basis (SOB) for the remediation of OUs 2 (consisting of 285 residential properties), OU4 (school property) and OU5 (a storm water drain discharging into several creeks). In addition, the agencies rejected FMC’s preferred remedy and proposed a hybrid remediation program, known as CMA 9 that established a more stringent arsenic remedial goal of 20 parts per million (ppm) for soils at all locations and depths.

Two months later, FMC submitted a written response challenging the selection of CMA 9. EPA and NYSDEC notified FMC in a joint letter dated October 19, 2012 that the CMS report for the three OUs had been accepted and that the AOC was “deemed by the Agencies to be closed.” Although the purpose of the AOC was to compete an RFI and an CMS if required, FMC sent a remarkable letter to EPA and NYSDEC on October 25, 2012 claiming the agencies did not have the right to close the AOC because a final CMA had not been selected by the EPA. However, FMC did not specifically invoke the dispute resolution procedures in the AOC.

On May 28, 2013, NYSDEC issued its final SOB formally selecting CMA 9. FMC and the NYSDEC then entered into a series of tolling agreements extending the time in which to challenge this selection through April 30, 2014. On May 1, 2014, FMC sought to invoke the dispute resolution provisions of the AOC. NYSDEC then sent a letter dated May 7, 2014 to FMC’s counsel because FMC had refused to implement CMA 9, FMC planned to complete the work using the SSF.

In a letter dated May 22,2014,  EPA informed FMC that NYSDEC’s selection of a remedy in its Statement was not subject to the dispute resolution provisions of the AOC because the AOC had been closed. FMC then filed an article 78 proceeding on May  30, 2014 asserting NYSDEC’s unilateral selection of CMA 9 was arbitrary and capricious, that the agencies could not unilaterally modify the AOC and had acted arbitrarily when they declared the AOC closed and that NYSDEC did not have the authority to decision to use the hazardous waste remedial fund to pay for the remediation. FMC also sought a declaratory judgment finding that the Final Statement of Basis should not be used for the selection of a remediation program. In response, the DEC asserted its October 19, 2012 letter was a final determination and moved to dismiss the petition as time-barred.

The Supreme Court ruled that the October 19th was as a final determination for purposes of triggering the statute of limitations because the court said that the letter left “no doubt that there would be no further administrative action” and the agency would not alter its position. In addition, the court said FMC’s October 25th letter did not extend the statute of limitations because a request for reconsideration of an agency decision does not expand the statute of limitations. Since FMC did not file its petition by February 16, 2013, the court dismissed the petition.   Application of FMC Corporation vs NYSDEC, Index No. 2884-14 (Sup. Ct.- Albany, 08/20/15).

On appeal, the appellate division held the court had erred because the October 19th letter made no reference to the selection of a remedy. The court said the actual selection of a remedy did not occur until NYSDEC issued its final statement of basis in May 2013. Since there was no dispute that the parties entered into the tolling agreements in an effort to negotiate a resolution, the court held FMC timely filed its article 78 petition.

Since the trial court had only addressed the statute of limitations question, the appeals court could have stopped there and remanded the matter for further proceedings on the substantive claims. However, the panel then plunged into reviewing the merits of the dispute and this is where the judges went off the rails.

The court acknowledged that NYSDEC was authorized to assert its authority under titles 9 and 13 of Article 27 of the ECL and to issue the SOB. The court also found the SOB was the final corrective measure for OUs 2, 4 and 5 and also served as the Record of Decision (ROD) for purposes of selecting a remedial plan for these OUs under the SSF.

NYSDEC argued it was authorized to select CMA 9 and proceed with the remedial work pursuant to ECL 27-0916 (1) because FMC “unlawfully” dealt with hazardous waste. The court disagreed, saying that FMC at all relevant times was operating lawfully pursuant to its interim status. In so holding, the court confused having interim status and improperly allowing hazardous waste to released into the environment.

Section § 27-0916 is titled “Department authority for cleanups”. § 27-0916(1) provides:

The department shall have authority to clean up or return to its original state any area where hazardous wastes were disposed, possessed or dealt in unlawfully in violation of section 27-0914 of this article.

Section 27-0914(2), in turn, provides “No person shall dispose of hazardous wastes without authorization”.

What the court got wrong, though, was that while FMC was authorized by its interim status to manage waste in compliance with law, it was not authorized to dispose of wastes at the facility.

However, that was not the court’s worst stumble. In the last two paragraphs of the opinion, the court held that the agency was not authorized to implement the remedial work without first giving FMC an opportunity for a hearing to assert its challenge to CM, relying on ECL § 27-1313 [5] [a], [b], [c].  Now it is true that § 27-1313[3][a] provides that when a site poses a significant threat to the environment, the NYSDEC may order an owner (i) to develop an inactive hazardous waste disposal site remedial program, subject to the approval of the agency and (ii) to implement such program within reasonable time limits specified in the order. [emphasis added] Clearly, the use of the word “may” means that NYSDEC has the authority to issue an order but is not required to do so.

ECL § 27-1313[4] then provides that any such order “shall be issued only after notice and the opportunity for a hearing is provided to persons who may be the subject of such order.”

ECL 27-1313[5][a] also provides that when person ordered to eliminate a significant threat fails to do so within the time limits specified in the order, the NYSDEC may develop and implement a remedial program for the site. [emphasis added] Again, note the use of the word “may”.

However, the court ignored two other important provisions of § 27-1313 that give NYSDEC the discretion to unilaterally implement a remedial action. For example, § 27-1313[3](b) authorizes NYSDEC to spend money when the agency commissioner finds:

(i) that hazardous wastes at an inactive hazardous waste disposal site constitutes a significant threat to the environment; and

         (ii) that such threat is causing or presents an imminent danger of causing irreversible or irreparable damage to the environment; and

         (iii) the threat makes it prejudicial to the public interest to delay action until a hearing can be held pursuant to this title, the department may, pursuant to paragraph c of subdivision five of this section and within the funds available to the department…”

The court also ignored § 27-1313[5](d) authorizes NYSDEC to develop and implement a remedial program where the agency determines it is cost-effective. In determining if it is cost-effective to develop and implement a remedial program, the NYSDEC is required to consider the following four factors:

         (i) the ability of the department to determine, through the exercise of its scientific judgment, whether the elimination of the imminent danger of irreversible or irreparable damage to the environment can be achieved through limited actions;

         (ii) the ability of the department to identify the owner of the site and/or any person responsible for the disposal of hazardous wastes at such site with sufficient financial resources to develop and implement an inactive hazardous waste disposal site remedial program at such site;

         (iii) the nature of the danger to human health and the environment which the actions are designed to address; and

         (iv) the extent to which the actions would reduce such danger to human health or the environment or would otherwise benefit human health or the environment.[emphasis ended]

Based on the record in this case, it appears that NYSDEC made these requisite findings. For example, the agency determined that the interim actions that had been taken had been insufficient to eliminate the risks to human health, the contamination still posed a threat that warranted further action, that CMA 9 would eliminate that threat and that while FMC had sufficient financial resources, it had refused to implement the required cleanup.   Likewise, State Finance Law § 97-b(4) provides that NYSDEC does not have to obtain a voluntary agreement with owners or operators of inactive hazardous waste sites or other responsible parties to pay the costs of necessary remedial actions when it has been determined that condition dangerous to life or health exists.

In so ruling, the court ignored the legislative history of the SSF. The Legislature gave the NYSDEC Commissioner “[b]road powers … to respond to situations which significantly threaten public health or environmental degradation” with State funds (1982 Legis. Ann, at 273). The idea that the NYSDEC would first have to hold a hearing and have the responsible party refuse to implement a remedy before spending money to protect human health is simply contrary to the purpose of the statute. The decision also flies in the face of Allied Princess Bay Co. #2 v. Atochem N. Am., 855 F. Supp. 595 (E.D.N.Y. 1993) where the court ruled that NYSDEC could act to clean up the site itself under ECL § 27-1313(5)(d) if the NYSDC determines it is cost-effective.

Under this decision, NYSDEC might not have been able to respond to the Hoosick Falls crisis earlier this year. Unlike EPA which can issue unilateral administrative orders (UAOs) under section 106 of CERCLA and section 7003 of RCRA, NYSDEC lacks the authority under the SSF to issue UAOs. The principal tool DEC has to respond to human health emergencies involving hazardous wastes is the SSF. The last three paragraphs of the decision are written almost like an afterthought but they have the potential to cripple NYSDEC’s ability to spend money under the SSF.  With rumors leaking from the Trump transition team that the incoming administration is consider eliminating the federal Superfund program, it is more important than ever for the NYSDEC to have the right to use the SSF to respond to hazardous wastes that pose a risk to human health.

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